BAILLIE GIFFORD Emerging Markets Leading Companies Quarterly Update 31 March 2022
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BAILLIE GIFFORD Emerging Markets Leading Companies Quarterly Update 31 March 2022
Contents
01 Executive Summary Through passporting it has established Baillie Gifford
02 Commentary Investment Management (Europe) Limited (Frankfurt Branch)
to market its investment management and advisory services
06 Performance and distribute Baillie Gifford Worldwide Funds plc in
12 Portfolio Overview Germany. Similarly, it has established Baillie Gifford
Investment Management (Europe) Limited (Amsterdam
14 Governance Summary Branch) to market its investment management and advisory
16 Governance Engagement services and distribute Baillie Gifford Worldwide Funds plc in
The Netherlands.
17 Voting Baillie Gifford Investment Management (Europe) Limited
18 Transaction Notes also has a representative office in Zurich, Switzerland pursuant
to Art. 58 of the Federal Act on Financial Institutions
19 Legal Notices ("FinIA"). It does not constitute a branch and therefore does
not have authority to commit Baillie Gifford Investment
Management (Europe) Limited. The firm is currently awaiting
This document is solely for the use of professional authorisation by the Swiss Financial Market Supervisory
investors and should not be relied upon by any other Authority (FINMA) to maintain this representative office of a
person. It is not intended for use by retail clients. foreign asset manager of collective assets in Switzerland
pursuant to the applicable transitional provisions of FinIA.
Important Information and Risk Factors Baillie Gifford Investment Management (Europe) Limited
is a wholly owned subsidiary of Baillie Gifford Overseas
Baillie Gifford & Co and Baillie Gifford & Co Limited are Limited, which is wholly owned by Baillie Gifford & Co.
authorised and regulated by the Financial Conduct Authority Baillie Gifford Overseas Limited and Baillie Gifford & Co are
(FCA). Baillie Gifford & Co Limited is an Authorised authorised and regulated in the UK by the Financial Conduct
Corporate Director of OEICs. Authority.
Baillie Gifford Overseas Limited provides investment Persons resident or domiciled outwith the UK should
management and advisory services to non-UK consult with their professional advisers as to whether they
Professional/Institutional clients only. Baillie Gifford Overseas require any governmental or other consents in order to enable
Limited is wholly owned by Baillie Gifford & Co. Baillie them to invest, and with their tax advisers for advice relevant to
Gifford Overseas Limited is authorised and regulated by the their own particular circumstances.
Financial Conduct Authority. This document contains information on investments which
Baillie Gifford Asia (Hong Kong) Limited does not constitute independent research. Accordingly, it is not
柏基亞洲(香港)有限公司 is wholly owned by Baillie Gifford subject to the protections afforded to independent research and
Overseas Limited and holds a Type 1 and Type 2 licence from Baillie Gifford and its staff may have dealt in the investments
the Securities & Futures Commission of Hong Kong to market concerned.
and distribute Baillie Gifford’s range of collective investment All information is based on a representative portfolio, new
schemes to professional investors in Hong Kong. Baillie client portfolios may not mirror the representative portfolio
Gifford Asia (Hong Kong) Limited 柏基亞洲(香港)有限公司 exactly. As at March 31, 2022, in US dollars and sourced from
can be contacted at Suites 2713-2715, Two International Baillie Gifford & Co unless otherwise stated.
Finance Centre, 8 Finance Street, Central, Hong Kong,
Telephone +852 3756 5700. South Africa
Baillie Gifford Investment Management (Europe) Limited
provides investment management and advisory services to Baillie Gifford Overseas Limited is registered as a Foreign
Financial Services Provider with the Financial Sector Conduct
European (excluding UK) clients. It was incorporated in
Ireland in May 2018. Baillie Gifford Investment Management Authority in South Africa.
(Europe) Limited is authorised by the Central Bank of Ireland North America
as an AIFM under the AIFM Regulations and as a UCITS
management company under the UCITS Regulation. Baillie Baillie Gifford International LLC is wholly owned by Baillie
Gifford Investment Management (Europe) Limited is also Gifford Overseas Limited; it was formed in Delaware in 2005
authorised in accordance with Regulation 7 of the AIFM and is registered with the SEC. It is the legal entity through
Regulations, to provide management of portfolios of which Baillie Gifford Overseas Limited provides client service
investments, including Individual Portfolio Management
and marketing functions in North America. Baillie Gifford
(‘IPM’) and Non-Core Services. Baillie Gifford Investment
Management (Europe) Limited has been appointed as UCITS Overseas Limited is registered with the SEC in the United
management company to the following UCITS umbrella States of America.
company; Baillie Gifford Worldwide Funds plc. The Manager is not resident in Canada, its head office and
principal place of business is in Edinburgh, Scotland. Baillie
Gifford Overseas Limited is regulated in Canada as a portfolio
manager and exempt market dealer with the Ontario Securities
Calton Square, 1 Greenside Row, Edinburgh EH1 3AN
Telephone +44 (0)131 275 2000 bailliegifford.com
Copyright © Baillie Gifford & Co 2009. Ref: 20343 10009727
Commission ('OSC'). Its portfolio manager licence is currently Capital Market Authority. No authorization, licence or
passported into Alberta, Quebec, Saskatchewan, Manitoba and approval has been received from the Capital Market Authority
Newfoundland & Labrador whereas the exempt market dealer of Oman or any other regulatory authority in Oman, to provide
licence is passported across all Canadian provinces and such advice or service within Oman. BGO does not solicit
territories. Baillie Gifford International LLC is regulated by the business in Oman and does not market, offer, sell or distribute
OSC as an exempt market and its licence is passported across
any financial or investment products or services in Oman and
all Canadian provinces and territories. Baillie Gifford
Investment Management (Europe) Limited (‘BGE’) relies on no subscription to any securities, products or financial services
the International Investment Fund Manager Exemption in the may or will be consummated within Oman. The recipient of
provinces of Ontario and Quebec. this document represents that it is a financial institution or a
sophisticated investor (as described in Article 139 of the
Japan Executive Regulations of the Capital Market Law) and that its
officers/employees have such experience in business and
Mitsubishi UFJ Baillie Gifford Asset Management Limited
financial matters that they are capable of evaluating the merits
(‘MUBGAM’) is a joint venture company between Mitsubishi
and risks of investments.
UFJ Trust & Banking Corporation and Baillie Gifford
Overseas Limited. MUBGAM is authorised and regulated by Israel
the Financial Conduct Authority.
Baillie Gifford Overseas is not licensed under Israel’s
South Korea Regulation of Investment Advising, Investment Marketing and
Portfolio Management Law, 5755-1995 (the Advice Law) and
Baillie Gifford Overseas Limited is licensed with the Financial
does not carry insurance pursuant to the Advice Law. This
Services Commission in South Korea as a cross border
document is only intended for those categories of Israeli
Discretionary Investment Manager and Non-Discretionary
residents who are qualified clients listed on the First
Investment Adviser.
Addendum to the Advice Law.
Australia
Baillie Gifford Overseas Limited (ARBN 118 567 178) is
registered as a foreign company under the Corporations Act
2001 (Cth) and holds Foreign Australian Financial Services
Licence No 528911. This material is provided to you on the
basis that you are a “wholesale client” within the meaning of
section 761G of the Corporations Act 2001 (Cth)
(“Corporations Act”). Please advise Baillie Gifford Overseas
Limited immediately if you are not a wholesale client. In no
circumstances may this document be made available to a “retail
client” within the meaning of section 761G of the Corporations
Act. This material contains general information only. It does
not take into account any person’s objectives, financial
situation or needs.
Qatar
The materials contained herein are not intended to constitute an
offer or provision of investment management, investment and
advisory services or other financial services under the laws of
Qatar. The services have not been and will not be authorised by
the Qatar Financial Markets Authority, the Qatar Financial
Centre Regulatory Authority or the Qatar Central Bank in
accordance with their regulations or any other regulations in
Qatar.
Oman
Baillie Gifford Overseas Limited (“BGO”) neither has a
registered business presence nor a representative office in
Oman and does not undertake banking business or provide
financial services in Oman. Consequently, BGO is not
regulated by either the Central Bank of Oman or Oman’s
Past Performance
Past performance is not a guide to future returns. Changes in
investment strategies, contributions or withdrawals may
materially alter the performance and results of the portfolio.
Material market or economic conditions will have an
impact on investment results. The returns presented in this
document are gross of fees unless otherwise stated and reflect
the reinvestment of dividends and interest.
Historical performance results for investment indexes
and/or categories, generally do not reflect the deduction of
transaction costs and/or custodial charges or the deduction of
an investment management fee, the incurrence of which would
have the effect of decreasing historical performance results.
It should not be assumed that recommendations/
transactions made in the future will be profitable or will equal
performance of the securities mentioned.
Potential for Profit and Loss
All investment strategies have the potential for profit and loss.
Stock Examples
Any stock examples, or images, used in this paper are not
intended to represent recommendations to buy or sell, neither is
it implied that they will prove profitable in the future. It is not
known whether they will feature in any future portfolio
produced by us. Any individual examples will represent only a
small part of the overall portfolio and are inserted purely to
help illustrate our investment style. A full list of portfolio
holdings is available on request.
The commentary relates to the Baillie Gifford Emerging
Markets Leading Companies strategy and not all stocks
mentioned may be held in the portfolio.
Financial Intermediaries
This document is suitable for use of financial intermediaries.
Financial intermediaries are solely responsible for any further
distribution and Baillie Gifford takes no responsibility for the
reliance on this document by any other person who did not
receive this document directly from Baillie Gifford.
Executive Summary 01 Product Overview Emerging Markets Leading Companies is a concentrated, long-term, regional equity strategy. It adds value through active management by identifying and exploiting inefficiencies through investment in global emerging markets encompassing Emerging Europe, Emerging Asia, the Middle East, Africa and Latin America. Risk Analysis Key Statistics Number of Holdings 47 Typical Number of Holdings 35-60 Active Share 71%* Rolling One Year Turnover 10% *Relative to MSCI Emerging Markets Index. Source: Baillie Gifford & Co, MSCI. Performance over the past year has been challenging due to a combination of factors: the conflict in Ukraine, inflation concerns and continued volatility in China We have spent time considering the second order implications of the Ukrainian conflict and as such the `barbell' positioning in the portfolio continues to feel appropriate The positive long run structural trends in EM remain intact. When the cyclical tailwinds for the commodity exporters are added, then the attractions of Emerging Markets are clear. Baillie Gifford Key Facts Assets under management and advice US$365.3bn Number of clients 871 Number of employees 1684 Number of investment professionals 352
Commentary 02
“He knows nothing; and he thinks he knows had a lasting impact on some stocks in the portfolio. The
Chinese Communist Party has clearly decided to assert its
everything. That points clearly to a political primacy over the private sector, though in doing so it has
career.” been the first major country to impose a regulatory system
GEORGE BERNARD SHAW, MAJOR BARBARA on its online platforms. Will others follow? The increased
regulation (likely to continue up to the National People’s
Congress) has certainly removed the blue-sky cases for
some companies in the portfolio, but we believe that most,
At Baillie Gifford, we’re in the investment business, if not all, can still meet our hurdle of doubling in hard
not the business of politics so we’ll freely confess to not currency terms over the next five years. And Russia…?
knowing everything. The last couple of years have We began to rebuild positions in Russia in 2016/17.
certainly brought their share of unexpected challenges. The country had seen its economy contract in 2015 and
We’ve had to contend with the impact of Covid, sweeping 2016 and interest rates were at about 10 per cent.
changes in Chinese regulation and the Russian invasion of We anticipated a cyclical recovery as interest rates fell
Ukraine. While there has been a considerable humanitarian and commodity prices improved due to the lack of
aspect to the former and the latter, it is our job to invest our investment in new supply (notably oil, copper and nickel).
clients’ pensions and savings, so it is the implications for Though interrupted by Covid, this thesis was playing out
stock markets that we have to focus on. Looking through extremely well going into the final months of 2021 with
the prism of a five-year investment horizon (and beyond), Russia exhibiting strong economic fundamentals and the
these events are still relatively short term. The question we Russian companies in the portfolio performing robustly.
consider in each case is has the event changed where each On fundamentals alone, a bigger position in Russia would
individual company in the portfolio will be in five or probably have been warranted. However, it is a long-
ten-years’ time. In some cases, the answer is clearly ‘yes’. standing shibboleth of the Emerging Markets Team never
Broadly, Covid has accelerated the move online to have a double-digit position in Russia as the geopolitical
around the world, providing a lot of exciting new risks can be dormant for some time, but they are never
opportunities. It is true, there is likely to be a hiatus as we extinct.
return to some form of normality and binge on the ‘real’
world experiences we have all been missing. However,
ever increasing digitalisation across large aspects of our
daily lives looks inevitable. Chinese regulation has alsoCommentary 03
While Russian forces began to gather around Ukraine Certainly, there is a strong relationship between the two
over the new year, stock prices weakened. However, our countries, but one must be careful not to take everything
view, and just about everyone else’s, was that Putin was too literally. The phrase ‘friendship without limits’ was
a rational actor and that a full-scale Russian invasion of used by President Xi before the Olympics but then China
Ukraine was obviously a lose/lose for all sides concerned. also voted ‘abstain’ twice at the United Nations on the
Here we were clearly wrong. Once it became clear that a Russian invasion. The large state-owned Chinese banks
full-scale invasion was underway and that the west would are reported to have been already limiting transactions
respond robustly, we attempted to liquidate all the with Russia. Such moves are consistent with their
Russian positions. After some intermittent trading, trade historical pattern of quietly complying with US sanctions
processing ceased, and Russian stocks were suspended against North Korea, Iran and even Hong Kong, regardless
across all trading venues. This combined with pending of the public rhetoric.
index exclusion led our Fair Value Committee to write The threat of secondary sanctions if China continues
down the value of the Russian holdings to zero. to do business with Russia is a much higher stakes game
So, what happens next? There appear to be three than what has been the case with Russian sanctions
possible outcomes: Russia continues to escalate the war (which themselves have been much more severe than
and becomes a pariah state; after more attritional fighting, anyone expected). For example, the effects of cutting
there is a ceasefire and a grudging peace; there is regime China out of SWIFT would be much more punishing
change in Russia. Before trading was suspended the to China than they have been for Russia. But equally,
market was certainly pricing in the first scenario: it would be much more problematic for the rest of the
the Sberbank depositary receipt, for example, started the world. For example, the volume of trade between the EU
year trading at about $15.00 and last traded at $0.05. and China is at least ten-times that of trade between Russia
In the event that trading does resume, we would look to and China. Taking both the US and the EU together, China
exit the Russian holdings prudently and will try to avoid exports around $1trn, versus just $68bn to Russia. Is it
participating in the inevitable fire sale. Finally, should the likely that Beijing will risk losing access to markets in the
situation be significantly different when trading resumes, developed world while Chinese companies have much
we do reserve the right to change our minds. more to lose than to gain by violating sanctions? In short,
In speaking to clients during the invasion of Ukraine, Russia exports more to the Netherlands than it does to the
there has been a subtle undercurrent of concern that an US, while the economic linkages between China and the
‘Axis of Evil’ is developing between Russia and China US remain considerable. US companies made roughly
and what this means for the Emerging Markets universe. $410bn in revenues from China in 2019.Commentary 04
More broadly, how about China from an ESG This lockstep correlation between five-year rolling
perspective? We’re mindful of the issues in Xinjiang and hard currency earnings growth and stock price
in Hong Kong but we do try to take a balanced approach. performance has endured through a myriad of different
This is a system that has raised 850 million people out of market cycles, financial crises, value rallies, inflationary
poverty within a generation. It has also made dramatic periods, sovereign defaults etc. Share price returns clearly
progress on key UN Sustainable Development Goals, such and consistently follow long-run, hard currency earnings
as increasing levels of sanitation, healthcare and education. growth. This is important. The ability not to be thrown
And yet this is still an emerging country with GDP/capita off course by near-term noise or concerns, and simply
of $10,435, lower than Chile ($12,232), Poland ($15,721), focusing on making sure the portfolio has only those
the UK ($41,059) and the US ($63,593). Because of its companies with the potential to produce the strongest
great size, China is clearly a superpower, but in terms of profit growth is vital. We now have decades of evidence
the wealth of its population, it still has a long way to go – to show that by focusing on investing only in the fastest
and therein lies the opportunity. growing companies, irrespective of the dominant market
Given the context above, what has the team been narrative of the day, this will ultimately provide the level
doing? Experience is useful here. We have seen these of outperformance that our clients rightly expect.
types of drawdowns before. There are three periods in the Sticking to this discipline has always served the team
history of our Emerging Markets strategies where we have well. Importantly, we would highlight that the analysis of
witnessed drawdowns of more than 45 per cent (July 1997 the current portfolio suggests that the growth profile of
– August 1998, March 2000 – September 2001, October the companies, and their ability to finance that growth
2007 – February 2009), levels far more extreme than what gives us huge optimism for the returns that should be
we have experienced so far this time. In all instances, achievable over the coming five years. To give just three
what followed was a period of strong relative and absolute examples:
performance. So what have we learnt from these periods? 1. Free cash flows are growing at 23 per cent per annum
If we could point to one discipline that has been critical in (pa), 85 per cent more than the index
allowing us to keep delivering strong relative and absolute
2. Earnings are growing at 17 per cent pa, 30 per cent
returns for those clients with the forbearance to stick with
more than the index
us it would be the following.
3. The portfolio has a net profit margin of 14 per cent,
It doesn’t matter what type of market environment
35 per cent more than the index
you’re in, sustained hard currency earnings growth
conquers all. Ultimately this is what will determine performance.
This is not to diminish the difficulty of the current period
Delivered median total returns on earnings growth quintiles of underperformance in both relative and absolute terms,
Rolling 5-year horizons (1994–2021) but by retaining our focus on the key drivers of
performance – the underlying earnings power of each
Excess earnings growth pa (%)
15 30
company in the portfolio – we will ensure the next few
Relative return pa (%)
10 20
years are as profitable for shareholders as they should be.
5 10
In light of the above, as you would expect, the team
0 0 has been examining the portfolio to check whether the
-5 -10 outlook for the companies and the overall positioning
-10 -20 remains appropriate. Have recent events significantly
-15 -30
altered the growth profile?
Quintile 5 Q4 Q3 Q2 Quintile 1
(Low) (High)
Delivered Earnings Growth Delivered Total Returns
Sources: FactSet, Worldscope, FTSE, MSCI. Based on the Emerging Market
Universe of equities.Commentary 05
In many respects, Russia’s invasion of Ukraine has In the more normal course of events, Chinese car
accelerated many of the trends that were already at play manufacturer Geely also detracted from performance this
beforehand – inflation, a focus on energy security, a supply quarter. Geely’s parent owns Volvo, Polestar, Lotus and
squeeze in many commodities, aggressive investment in the London EV Company (makers of London taxis).
renewables and growing nationalism – to this end, the Although Geely reported revenues up 10.3 per cent
portfolio’s barbell positioning, which has been in place for year-over-year (yoy), net profit was below expectations
some years, continues to seem appropriate both in the short and down 12.4 per cent yoy. Geely has not escaped the
and long term. We are considering adding commodity broader industry issues caused by the global chip
currency exposure through the banking systems of various shortage and the impact rising raw materials cost
countries. We are also thinking about small additions to the weighed on margins. In addition, there are mounting
IT outsourcers (healthy demand plus a favourable currency expenses related to research and development, such as
outlook). Funding these changes is likely to be through a electric drivetrains and autonomous driving. Nonetheless,
combination of things that have worked and cutting Geely’s platform strategy should deliver a powerful
domestic India exposure given risks on the macroeconomic model cycle through its various brands. The potential
front due primarily to high oil prices. Finally, stepping listing of Zeekr (its high-end electric vehicle brand)
back from the volatile markets, the tail risks make the could also boost sentiment. Geely has a technological
current modest underweight in China seem prudent. leadership among its domestic peers and the company
is expected to deliver synergies from its partnerships on
platform-sharing, product development and cost-sharing.
Performance
We continue to believe Geely will be one of the long-
Clearly this has been another difficult period for term winners in the Chinese auto market.
performance. Nonetheless, there have been very few On the more positive side of the ledger, Petrobras
transactions the portfolio, both during the quarter and enjoyed another strong quarter with revenues up
indeed over the last twelve months. To achieve long-term 79 per cent yoy and production continuing to grow, albeit
outperformance, it is necessary to have differentiated marginally. It is worth noting that consolidated lifting
views from the market and this inevitably leads to short- costs (excluding leases and taxes) were approximately
term periods of underperformance. What is critical is that $5 per barrel while in the pre-salt area these were
we do not deviate from our investment philosophy and approximately $3.20 per barrel. Not only does this make
process during these times and it is this discipline that Petrobras one of the lowest cost producers outside of the
separates us from being mere momentum players and the Middle East, it also means that the company can remain
long-term growth investors we consistently aspire to be. profitable at much lower oil prices – though that is not
Given our decision to write down the value of the our base case. Indian conglomerate Reliance Industries
portfolio’s Russia holdings to zero, it is no surprise that also contributed again this quarter. While its telecoms
they dominate the detractors to performance. Without and retail businesses continue to be long-term drivers of
listing all and sundry, it is worth picking out a couple of the company, Reliance’s refining business has benefited
the Russian stocks to explain our enthusiasm right up until from higher oil prices, while its KG-D6 gas field also saw
the point that Putin decided that ‘war-war was better than higher production and prices. Finally, B3, owner of the
jaw-jaw’. For example, in 2021, Sberbank’s operating Brazilian stock exchange also performed well. While the
income was up 17.7 per cent, driven by retail lending company faced issues with higher inflation and interest
and its wealth management business. Convenience store rates, renewed Covid outbreaks and broader political
retailer Magnit saw revenue growth of 19.5 per cent in uncertainty, higher commodity prices are a strong
2021 across its 26,077 stores. Even in the event that tailwind for the economy and the stock market. During
trading resumes in Russian stocks and depositary the fourth quarter, the B3 completed its acquisition of
receipts, unless sanctions are removed it is unlikely 100 per cent of Neoway Technology. Management
these companies will hit the heights again in the believe that Neoway will strengthen B3’s presence in the
foreseeable future. data and analytics and provide new opportunities in terms
industries and types of clients.
Disruption Week investment webinar series, June 21-24.
Details & registration:bailliegifford.com/DisruptionWeekPerformance - US Dollar 06
Performance Objective
+3% p.a. over rolling 5 year periods vs benchmark.
The performance target stated is aspirational and in no way guaranteed, nor is it intended to be precise,
and is not used for the purpose of determining or constraining the composition of the fund’s portfolio. We
believe it to be a reasonable estimate of the amount by which we can outperform the relevant benchmark
in the long term through the consistent application of our investment process, taking into account the
opportunity set and the characteristics of the markets in which the strategy invests. Performance may
vary between segregated accounts and pooled funds in different jurisdictions as each structure will bear a
different set of costs. A single performance target may not be appropriate for all vehicles in all
jurisdictions and for this reason our fund specific materials will often refer to ‘material’ outperformance of
a benchmark. Factors that may lead to Baillie Gifford failing to meet our investment performance
objectives in future include a significant change in market characteristics such that our growth investment
style is unrewarded for a period of time; or misjudgement of the prospects for long-term earnings growth
for a significant number of individual stocks in which we invest.
Periodic Performance
Composite Net (%) Benchmark (%) Difference (%)
3 Months* -13.3 -6.9 -6.3
1 Year* -20.5 -11.1 -9.4
3 Years 7.0 5.3 1.7
5 Years 9.3 6.4 3.0
10 Years 5.7 3.7 2.0
15 Years 5.2 4.1 1.1
Since Inception 8.9 7.5 1.3
Annualised periods ended 31 March 2022. *Not annualised.
Inception date: 30 November 2004
Figures may not sum due to rounding.
Benchmark is MSCI Emerging Markets Index.
Source: StatPro, MSCI.
US dollars
Discrete Performance
31/03/17- 31/03/18- 31/03/19- 31/03/20- 31/03/21-
31/03/18 31/03/19 31/03/20 31/03/21 31/03/22
Composite Net (%) 32.0 -3.5 -13.0 77.2 -20.5
Benchmark (%) 25.4 -7.1 -17.4 58.9 -11.1
Benchmark is MSCI Emerging Markets Index.
Source: StatPro, MSCI.
US dollars
EMLC composite is more concentrated than MSCI Emerging Markets Index.Performance - Euro 07
Performance Objective
+3% p.a. over rolling 5 year periods vs benchmark.
The performance target stated is aspirational and in no way guaranteed, nor is it intended to be precise,
and is not used for the purpose of determining or constraining the composition of the fund’s portfolio. We
believe it to be a reasonable estimate of the amount by which we can outperform the relevant benchmark
in the long term through the consistent application of our investment process, taking into account the
opportunity set and the characteristics of the markets in which the strategy invests. Performance may
vary between segregated accounts and pooled funds in different jurisdictions as each structure will bear a
different set of costs. A single performance target may not be appropriate for all vehicles in all
jurisdictions and for this reason our fund specific materials will often refer to ‘material’ outperformance of
a benchmark. Factors that may lead to Baillie Gifford failing to meet our investment performance
objectives in future include a significant change in market characteristics such that our growth investment
style is unrewarded for a period of time; or misjudgement of the prospects for long-term earnings growth
for a significant number of individual stocks in which we invest.
Periodic Performance
Composite Net (%) Benchmark (%) Difference (%)
3 Months* -11.3 -4.9 -6.5
1 Year* -16.0 -6.1 -9.9
3 Years 7.4 5.6 1.7
5 Years 8.5 5.5 2.9
10 Years 7.7 5.6 2.0
15 Years 6.5 5.4 1.1
Since Inception 10.0 8.6 1.4
Annualised periods ended 31 March 2022. *Not annualised.
Inception date: 30 November 2004
Figures may not sum due to rounding.
Benchmark is MSCI Emerging Markets Index.
Source: StatPro, MSCI.
euro
Discrete Performance
31/03/17- 31/03/18- 31/03/19- 31/03/20- 31/03/21-
31/03/18 31/03/19 31/03/20 31/03/21 31/03/22
Composite Net (%) 14.8 5.7 -10.9 65.4 -16.0
Benchmark (%) 9.0 1.8 -15.4 48.4 -6.1
Benchmark is MSCI Emerging Markets Index.
Source: StatPro, MSCI.
euroPerformance - Sterling 08
Performance Objective
+3% p.a. over rolling 5 year periods vs benchmark.
The performance target stated is aspirational and in no way guaranteed, nor is it intended to be precise,
and is not used for the purpose of determining or constraining the composition of the fund’s portfolio. We
believe it to be a reasonable estimate of the amount by which we can outperform the relevant benchmark
in the long term through the consistent application of our investment process, taking into account the
opportunity set and the characteristics of the markets in which the strategy invests. Performance may
vary between segregated accounts and pooled funds in different jurisdictions as each structure will bear a
different set of costs. A single performance target may not be appropriate for all vehicles in all
jurisdictions and for this reason our fund specific materials will often refer to ‘material’ outperformance of
a benchmark. Factors that may lead to Baillie Gifford failing to meet our investment performance
objectives in future include a significant change in market characteristics such that our growth investment
style is unrewarded for a period of time; or misjudgement of the prospects for long-term earnings growth
for a significant number of individual stocks in which we invest.
Periodic Performance
Composite Net (%) Benchmark (%) Difference (%)
3 Months* -10.8 -4.3 -6.5
1 Year* -16.7 -6.8 -9.9
3 Years 6.7 4.9 1.7
5 Years 8.2 5.3 2.9
10 Years 7.8 5.8 2.0
15 Years 8.1 6.9 1.1
Since Inception 11.2 9.9 1.4
Annualised periods ended 31 March 2022. *Not annualised.
Inception date: 30 November 2004
Figures may not sum due to rounding.
Benchmark is MSCI Emerging Markets Index.
Source: StatPro, MSCI.
sterling
Discrete Performance
31/03/17- 31/03/18- 31/03/19- 31/03/20- 31/03/21-
31/03/18 31/03/19 31/03/20 31/03/21 31/03/22
Composite Net (%) 17.6 3.9 -8.5 59.2 -16.7
Benchmark (%) 11.8 0.1 -13.2 42.8 -6.8
Benchmark is MSCI Emerging Markets Index.
Source: StatPro, MSCI.
sterlingPerformance- Canadian Dollar 09
Performance Objective
+3% p.a. over rolling 5 year periods vs benchmark.
The performance target stated is aspirational and in no way guaranteed, nor is it intended to be precise,
and is not used for the purpose of determining or constraining the composition of the fund’s portfolio. We
believe it to be a reasonable estimate of the amount by which we can outperform the relevant benchmark
in the long term through the consistent application of our investment process, taking into account the
opportunity set and the characteristics of the markets in which the strategy invests. Performance may
vary between segregated accounts and pooled funds in different jurisdictions as each structure will bear a
different set of costs. A single performance target may not be appropriate for all vehicles in all
jurisdictions and for this reason our fund specific materials will often refer to ‘material’ outperformance of
a benchmark. Factors that may lead to Baillie Gifford failing to meet our investment performance
objectives in future include a significant change in market characteristics such that our growth investment
style is unrewarded for a period of time; or misjudgement of the prospects for long-term earnings growth
for a significant number of individual stocks in which we invest.
Periodic Performance
Composite Net (%) Benchmark (%) Difference (%)
3 Months* -14.2 -8.0 -6.3
1 Year* -21.0 -11.6 -9.3
3 Years 4.7 3.0 1.7
5 Years 7.9 5.0 2.9
10 Years 8.1 6.1 2.1
15 Years 5.8 4.7 1.1
Since Inception 9.2 7.8 1.3
Annualised periods ended 31 March 2022. *Not annualised.
Inception date: 30 November 2004
Figures may not sum due to rounding.
Benchmark is MSCI Emerging Markets Index.
Source: StatPro, MSCI.
Canadian dollars
Discrete Performance
31/03/17- 31/03/18- 31/03/19- 31/03/20- 31/03/21-
31/03/18 31/03/19 31/03/20 31/03/21 31/03/22
Composite Net (%) 27.6 0.0 -7.3 56.4 -21.0
Benchmark (%) 21.2 -3.7 -12.0 40.3 -11.6
Benchmark is MSCI Emerging Markets Index.
Source: StatPro, MSCI.
Canadian dollarsPerformance – Australian Dollar 10
Performance Objective
+3% p.a. over rolling 5 year periods vs benchmark.
The performance target stated is aspirational and in no way guaranteed, nor is it intended to be precise,
and is not used for the purpose of determining or constraining the composition of the fund’s portfolio. We
believe it to be a reasonable estimate of the amount by which we can outperform the relevant benchmark
in the long term through the consistent application of our investment process, taking into account the
opportunity set and the characteristics of the markets in which the strategy invests. Performance may
vary between segregated accounts and pooled funds in different jurisdictions as each structure will bear a
different set of costs. A single performance target may not be appropriate for all vehicles in all
jurisdictions and for this reason our fund specific materials will often refer to ‘material’ outperformance of
a benchmark. Factors that may lead to Baillie Gifford failing to meet our investment performance
objectives in future include a significant change in market characteristics such that our growth investment
style is unrewarded for a period of time; or misjudgement of the prospects for long-term earnings growth
for a significant number of individual stocks in which we invest.
Periodic Performance
Composite Net (%) Benchmark (%) Difference (%)
3 Months* -16.0 -9.9 -6.1
1 Year* -19.3 -9.8 -9.5
3 Years 5.1 3.4 1.7
5 Years 9.7 6.7 3.0
10 Years 9.2 7.1 2.1
15 Years 5.8 4.6 1.1
Since Inception 9.1 7.7 1.3
Annualised periods ended 31 March 2022. *Not annualised.
Inception date: 30 November 2004
Figures may not sum due to rounding.
Benchmark is MSCI Emerging Markets Index.
Source: StatPro, MSCI.
Australian dollars
Discrete Performance
31/03/17- 31/03/18- 31/03/19- 31/03/20- 31/03/21-
31/03/18 31/03/19 31/03/20 31/03/21 31/03/22
Composite Net (%) 31.3 4.2 1.0 42.4 -19.3
Benchmark (%) 24.7 0.4 -4.1 27.7 -9.8
Benchmark is MSCI Emerging Markets Index.
Source: StatPro, MSCI.
Australian dollarsPerformance – Attribution 11 Stock Level Attribution Top and Bottom Ten Contributors to Relative Performance Quarter to March 31, 2022 One Year to March 31, 2022 Stock Name Contribution (%) Stock Name Contribution (%) Petrobras 2.0 Petrobras 3.4 B3 S.A. 0.8 Reliance Industries 1.0 Gazprom* 0.7 ICICI Bank 0.8 Reliance Industries 0.5 Li Ning 0.5 Lukoil* 0.5 TSMC 0.5 KGHM Polska Miedz 0.4 Pinduoduo* 0.5 Credicorp 0.4 CATL 0.5 Bank Rakyat Indonesia 0.3 Gazprom* 0.4 Novatek* 0.3 Bank Rakyat Indonesia 0.4 Banco Bradesco 0.3 Lukoil* 0.4 Sberbank -4.1 Sberbank -3.5 Norilsk Nickel -3.1 Norilsk Nickel -2.9 Magnit -1.1 Ping An Insurance -1.0 Meituan -0.5 Naspers -1.0 Vale -0.4 Magnit -0.9 Naspers -0.4 Alibaba -0.9 Geely Automobile -0.3 Kuaishou Technology -0.8 Samsung Electronics -0.3 Meituan -0.8 Haier Smart Home -0.3 Bilibili -0.7 Li Ning -0.2 Vale -0.4 Source: StatPro, MSCI. EMLC composite relative to MSCI Emerging Markets Index. The holdings identified do not represent all of the securities purchased, sold or held during the measurement period. Past performance does not guarantee future returns. A full list showing all holdings’ contribution to the portfolio’s performance and a description on how the attribution is calculated is available on request. Some stocks may not have been held for the whole period. *Stocks not held in the portfolio. As at March 3rd 2022, three Russian holdings have been valued at zero by our Fair Value Pricing Committee due to the ongoing issues in the Russian market: Sberbank, Magnit and Norilsk Nickel.
Portfolio Overview 12 Top Ten Largest Holdings Stock Name Description of Business % of Portfolio TSMC Semiconductor manufacturer 12.2 Samsung Electronics Producer of consumer and industrial electronic equipment 8.8 Petrobras Oil exploration and production 6.1 Tencent Internet service portal 5.2 Reliance Industries Indian petrochemical company 4.8 Alibaba Online commerce 4.7 MercadoLibre Latin American e-commerce platform 4.6 Ping An Insurance Provides insurance services in China 4.3 First Quantum Minerals Mining company 3.3 Samsung SDI South Korean electronics company 3.0 Total 56.9 Top and Bottom Five Geographical Location Top and Bottom Five Industry Positions* Positions* Industry % Difference Geographical Location % Difference Internet & Direct Marketing Retail 10.2 Brazil 9.4 Oil, Gas & Consumable Fuels 6.2 Other Emerging Markets 3.3 Technology Hardware, Storage & Peripherals 3.2 Panama 1.4 Semiconductors & Semiconductor Equipment 3.1 Poland 1.1 Insurance 2.3 Singapore 0.9 Chemicals -3.4 Saudi Arabia -4.2 Banks -3.3 Taiwan -3.9 Real Estate Management & Development -2.0 South Africa -3.1 Food Products -1.9 Thailand -1.9 Wireless Telecommunication Services -1.9 Malaysia -1.5 *Relative to MSCI Emerging Markets. Source: Baillie Gifford & Co, MSCI.
Governance Summary 13
Voting Activity
Votes Cast in Favour Votes Cast Against Votes Abstained/Withheld
Companies 11 Companies 3 Companies None
Resolutions 52 Resolutions 7 Resolutions None
When thinking about ESG, it is as important to understand where you
are starting from, as where you are hoping to go.
ESG approaches have to accommodate complexity and nuance -
these issues do not lend themselves to binary classifications.
Ultimately, effective ESG integration involves ongoing research and
engagement, not simple solutions.
Company Engagement
Engagement Type Company
Environmental/Social Alibaba Group Holding Limited, Geely
Automobile Holdings Limited, Kuaishou
Technology, Petroleo Brasileiro S.A. -
Petrobras, Samsung Electronics Co.,
Ltd.
AGM or EGM Proposals PT Bank Rakyat Indonesia (Persero) Tbk,
Sea Limited
Notes on company engagements highlighted in blue can be found in this report. Notes on other company
engagements are available on request.Governance Summary 14
Do the tragic events unfolding in Ukraine pose a moment We have some sympathy with the instinct to challenge
of reckoning for environmental, social and governance ESG investors and what they stand for. It’s hard to
(ESG) investors? Can we continue to assert that ESG is disagree with these rebuttals, although not entirely for the
a force for good or matters in the current environment? reasons suggested by some commentators.
Amid the uncertainties playing out on the world stage, As we see it, ESG is a process of change, constantly
ESG may seem little more than a high-level sorting shifting – not a paint-by-numbers labelling exercise.
exercise, with its binary ‘good’ or ‘bad’ classifications. As active, long-term investors, we understand there is no
Defence companies, to date banished from ESG such thing as a perfect company. Being overly prescriptive
portfolios with other so-called sin stocks such as tobacco, from the outset about what good looks like – for example,
are suddenly rebadged as ESG investments. After all, by placing too much emphasis on a set of pre-determined
what could be more ethical than the right of states to metrics and scores or sectoral exclusions – ignores
defend themselves against tyranny? And, by extension, critical context, complexity and nuance. This is where
with energy prices skyrocketing, it must surely be many commentators have got it wrong.
justifiable to pump money into oil and gas, and possibly It’s not how we go about ESG. The question we
coal, companies? have always sought to answer through ESG is: ‘how
But this creates a dilemma for many. If oil and gas, does the company get better from this starting point?’
coal and weapons are now ESG-friendly, even ethical, We believe that companies that are fundamentally
then perhaps it is time to admit that ESG investing has misaligned with broader societal expectations and ignore
become redundant or meaningless. At least, so says a their environmental impacts are unlikely to be successful
succession of opinion pieces in the media recently, over the long run. Investing in companies, not sectors
calling upon the industry to clarify what purpose and nor themes, we analyse each company on its merits. We
relevance ESG has. ascertain both its positive and negative impacts (and while
we’re clarifying, creating jobs and contributing to a tax
base can be positive impacts).Governance Summary 15
We consider ongoing engagement with company
management as core to our investment activities and
integral to our long-term investment framework.
Sometimes, this engagement will involve reassuring
management of our support during challenging periods;
at other times, it entails pushing companies to ‘do and
be better.’
What that entails rightly continues to change. Societal
norms and expectations do not stand still, and our
understanding of environmental issues, such as climate
change, has become more acute. Likewise, you would
expect the issues that we examine to determine the
investment case and raise with company boards and
management to adapt and grow with the times.
ESG resists easy classification. But that doesn’t make
it meaningless. The consideration of ESG factors, by its
nature, is a process of change. Yes, it involves assessing
the current risks and opportunities, but the emphasis
should be on ascertaining where the opportunities for
improvement (and potentially transformation) lie.
And what ‘better’ looks like will depend on your
starting point. If the starting point changes fundamentally
(as the Russian invasion of Ukraine may prove), then it is
both legitimate and necessary to re-examine the company
and its credentials. We can establish how the company
can improve and the pathways it will need to tread to get
there.
As investors that believe fundamentally in the
importance of due consideration of ESG matters and our
responsibility as stewards of our clients’ capital, we need
to grapple with this complexity. There are no easy answers
– no neat boxes to tick, no simple metrics to apply. There
is only detailed analysis and ongoing engagement, and a
healthy dose of humility.Governance Engagement 16
Company Engagement Report
Alibaba Group Holding Limited Objective: We met with Alibaba's director of ESG engagement and IR in order to
encourage improved ESG reporting and to explore how sustainability is managed across
the Group.
Discussion: Alibaba recognises that its ESG reporting has not been comprehensive
enough in the past and has committed to improving it greatly in 2022. The ambition to
target ESG improvements was evident on the call and we commended the ambition in
Alibaba's recently published carbon neutrality action plan, which seeks Scope 1 and 2
emissions neutrality by 2030. We also focused on the Group's social responsibility strategy
and discussed its new Common Prosperity committee which, chaired by the CEO, aims to
establish accountability across the Group for delivering on a number of social initiatives,
including improving the quality of jobs provided and enabled by Alibaba.
Outcome: We followed up our call with further communications illustrating good
sustainability practice and reporting and will continue to meet with the company to
encourage positive social and environmental developments at Alibaba.
Samsung Electronics Co., Ltd. Objective: To discuss Samsung's climate strategy
Discussion: While Samsung discloses its carbon emissions, it is yet to disclose updated
carbon reduction targets. In a discussion with the company's sustainability team, they
recognised the importance of having carbon reduction targets and explained that the
processing of defining and setting targets is underway. Targets are likely to be announced
later in the year. We welcomed the news that targets are in the process of being decided
and strongly encouraged them to be set in line with science-based projections.
Outcome: We agreed to follow up with the sustainability team when the climate targets
have been disclosed to discuss their stringency as part of the company's long-term
climate strategy.Voting 17
Votes Cast in Favour
Company Meeting Details Resolution(s) Voting Rationale
Banco Bradesco Pref AGM 11 We supported the incumbent being elected to the
03/10/22 fiscal council in the absence of any concerns with
the nominee.
Companies Voting Rationale
Bank Rakyat Indonesia, Cemex ADR, Credicorp, ICICI We voted in favour of routine proposals at the aforementioned
Prudential Life Insurance, LONGi Green Energy meeting(s).
Technology 'A' - Stock Connect, NAVER Corp, Reliance
Industries Ltd, Samsung Electronics, Samsung SDI Co
Ltd, Zai Lab ADR
Votes Cast Against
Company Meeting Details Resolution(s) Voting Rationale
Bank Rakyat Indonesia AGM 4 We opposed the remuneration for the board as
03/01/22 independent directors receive incentive-based pay
which we believe could compromise their
objectivity.
Bank Rakyat Indonesia AGM 8 We opposed the changes to the composition of the
03/01/22 company's management due to lack of disclosure
of the changes.
Cemex ADR Annual 4AA We opposed the election of the chair of the board
03/24/22 due to long-standing concerns with board diversity.
Cemex ADR Annual 4AD, 4AE We opposed the election of two non-executive
03/24/22 director because of their long board tenure, which
may be considered to compromise their
independence.
Cemex ADR Annual 4AG We opposed the election of a non-executive
03/24/22 director because we have concerns that the
director is over-boarded.
LONGi Green Energy EGM 2 We opposed the Provision of Guarantee because
Technology 'A' - Stock 01/10/22 the level of guarantees to be provided to one of the
Connect Company's subsidiaries is disproportionate to the
company's level of ownership, and therefore could
expose the company to inappropriate risk.
Votes Abstained
We did not abstain on any resolutions during the period.
Votes Withheld
We did not withhold on any resolutions during the period.Transaction Notes 18
New Purchases
Stock Name Transaction Rationale
First Quantum Minerals First Quantum Minerals primarily mines copper, with its major assets being in the Copper Belt in
Zambia (Sentine, Kansanshi) and in Panama (Cobre Panama). It has grown for over two decades
both through acquisitions and through developing new mines, led by a highly experienced
management team with an excellent record of delivering projects on time and at cost, while
demonstrating an engineering pedigree that has enabled the company to take on assets which
larger peers have shunned. Demand for copper is likely to remain elevated alongside the world's
green infrastructure build-out, and given the likely supply constraints that will result, we believe
that First Quantum has an important role to play in the net zero transition. The bulk of the capex
relating to the Cobre Panama project is now behind them, and with prices now fully exposed to
spot as hedges roll off, we expect a high and growing stream of cashflows to accrue. The
market does not appear to be factoring in this potential, and we have taken a holding for the
portfolio.
SEA Ltd ADR We have been following SEA's progress since IPO with much interest and admiration - the
company has progressed from being a mere distributor of Tencent's games in Greater South-
East Asia to developing their own hugely popular titles such as 'Free Fire', while using the cash-
flows from the gaming franchise to build what has become the region's dominant ecommerce
and payments platform, and seen off a number of rivals with well-respected and deep-pocketed
backers in the process. One of our main concerns around the investment case - the
sustainability of funding losses in the newer businesses from gaming cash-flows - has become
less relevant as network effects kick in on the ecommerce and fintech side, and as we have got
to know the business better, we have become more confident in the strength of their culture and
their competitive moat. The long-term opportunity is very substantial and the odds of an
attractive return from this point (not least after the wobble in share prices of businesses with
optically large valuations relative to their current level of profits) look good.
Complete Sales
Stock Name Transaction Rationale
LG ENERGY SOLUTIONS LG Energy is a subsidiary of LG Chemical and one of the world's leading battery producers, with
significant growth avenues providing batteries for electric vehicles and grid storage. We
participated in the IPO given a very attractive valuation for this growth potential, receiving a
small allocation. Subsequent share price performance has been very strong, significantly
reducing the upside available from here. As such, we have sold the small holding
Mahindra & Mahindra The investment case for Mahindra & Mahindra has changed relatively little since we first took a
holding for the portfolio. We hoped that the company's dominant position in tractors and light
vehicles could be strengthened by their newer franchise in passenger vehicles and SUVs, and
we were also attracted by the potential for a turnaround in their subsidiaries and the prospect of
improved capital allocation. We have been patient - after all, there has always seemed to be a
reasonable excuse for the lack of progress, whether it was weak monsoons, supply chain issues
or the vagaries of product cycles. But the record has been uninspiring for too long now to give
us much confidence that our investment case remains intact: revenues and EPS have barely
grown in the last five years, and returns on equity have remained subdued. As a frustrated Alice
scolded the White Queen, there must be a time when jam tomorrow becomes jam today. We
have sold the shares.Legal Notices 19
MSCI Source: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with
respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other
indexes or any securities or financial products. This report is not approved, endorsed, reviewed or produced by MSCI. None
of the MSCI data is intended to constitute investment advice or a recommendation to make (or refrain from making) any
kind of investment decision and may not be relied on as such.You can also read
